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Historically, preferred share yields have been lower than bond yields. Even so, preferred shares are popular to some investors because Select one: a. they pay constant dividends forever. b. they are safe securities. c. they provide 100% tax exclusion on their dividends to other corporations. d. they rank higher than common stockholders in the event that the firm is liquidated. e. their dividends are cumulative and must be paid before common stock dividends. Question 2 Not yet answered Marked out of 1.00 Flag question 0 qaid=2988478&qu 0 Question text 1 A coattail provision in shareholder rights is the right of a non-voting shareholder to Select one: a. share proportionally in dividends paid. b. vote for directors at annual meetings. c. sell his or her shares. d. be given first offer on new shares issued. e. vote during a takeover bid. Question 3 Not yet answered Marked out of 1.00 Flag question 0 Question text 1 qaid=2988479&qu 0 We observe a stock selling for $20 per share. The next dividend is expected to be $1 per share. We think that the dividend will grow by 10% indefinitely. What is the dividend yield on this stock? Select one: a. 5% b. 10% c. 15% d. 20% e. 25% A company is not currently paying any dividends, but is expected to start paying dividends in 5 years. The first dividend will be $0.50 per share, and is expected to grow at a rate of 10% per year indefinitely. The required return on this company's equity is 20%. What is the price of this stock today? Select one: a. $2.01 b. $2.21 c. $2.41 d. $5.00 e. $5.50 Question 5 Not yet answered Marked out of 1.00 Flag question 0 qaid=2988481&qu 0 Question text 1 Consider the following statement: In the dividend growth model, if the discount rate r is lower than the growth rate g, we could get a negative stock price. Select one: a. This statement is true because r - g would be less than zero. b. This statement is false because r - g would be less than zero. c. This statement is false because the growth rate should be used as the discount rate in this case. d. This statement is false because if g is greater than r, the stock price is infinitely large. e. This statement is true because if g is greater than r, the stock price is infinitely small. Question 6 Not yet answered Marked out of 1.00 Flag question 0 qaid=2988482&qu 0 Question text 1 Constant G Inc. will pay a dividend of $4.00 per share in 1 year's time. The required return on this company's shares is 16%, and the dividends are expected to increase by 6% per year. What is the value of Constant G's stock in 6 years? Select one: a. $33.46 b. $35.46 c. $40.00 d. $53.53 e. $56.74 Next You just bought a share of stock in ABC Corporation. You plan to sell the stock in 1 year. You know that the stock will be worth $70 in 1 year's time, and that the stock will pay a dividend of $10 per share at the end of the year. If you require a 25% return on your investment, what is the most you would pay for the stock? Select one: a. $40 b. $56 c. $64 d. $80 e. $288 Question 8 Not yet answered Marked out of 1.00 Flag question 0 qaid=2988484&qu 0 Question text 1 JKL Corporation has recently paid a dividend of $1.50 per share. Due to its investment in a high-risk, high-growth project, the company is projecting supernormal growth rates of 35%, 30%, and 25% in the next 3 years, before returning to the normal growth rate of 8% per year after that. What is JKL's stock price given that the required return on its equity is 15%? Select one: a. $7.95 b. $28.93 c. $33.38 d. $39.30 e. $50.77 Question 9 Not yet answered Marked out of 1.00 Flag question 0 qaid=2988485&qu 0 Question text 1 Which of the following is NOT a basic right of a shareholder? Select one: a. to vote for directors at annual meetings b. to share proportionally in any new stock sold c. to share proportionally in assets remaining after liabilities if the firm is liquidated d. to participate in a proxy contest e. All of the above are basic rights of shareholders. MNO Company common stocks are currently selling for $5 per share, with 1 million shares outstanding. The company has just paid a dividend recently. Its shares have a required rate of return of 20% and an estimated constant growth rate of 12%. How much dividend per share did the company just pay? Select one: a. $0.36 b. $0.40 c. $0.45 d. $1.00 e. $4.17 Q 07 Using a payback period investment criterion tends to bias us toward what kind of investments? Select one: a. riskier investment b. less risky investments c. longer-term investments d. shorter-term investments e. lower return investments Question 2 Not yet answered Marked out of 1.00 Flag question 0 qaid=2988488&qu 0 Question text 1 If the cutoff point were forever, then the discounted payback rule would be the same as which of the following investment criteria? Select one: a. Net Present Value b. Profitability Index c. Average Accounting Return d. Internal Rate of Return e. both a and b Question 3 Not yet answered Marked out of 1.00 Flag question 0 qaid=2988489&qu 0 Question text 1 Which of the following is NOT a disadvantage of the average accounting return criterion? Select one: a. it is not a true rate of return b. it uses an arbitrary benchmark cutoff rate c. it is based on book values and not market values d. it may lead to incorrect decisions when comparing mutually exclusive investments e. none of the above Ultimately, a good capital budgeting criterion must tell us two things. What are they? 1. It should tell us if a particular project is a good investment. 2. If there is more than one good mutually exclusive project, it should tell us which one to take. 3. If there is more than one investment criteria used, it should tell us which one is best. Select one: a. I and II b. I and III c. II and III d. I, II, and III e. None of the choices are valid. Question 5 Not yet answered Marked out of 1.00 Flag question 0 qaid=2988491&qu 0 Question text 1 To break-even in an accounting sense, a firm would use the _________ investment criterion. Select one: a. net present value b. profitability index c. payback period d. discounted payback period e. none of the above Question 6 Not yet answered Marked out of 1.00 Flag question 0 qaid=2988492&qu 0 Question text 1 A project has an initial cash outlay of $750,000 and an annual cash inflow of $220,000 for the next 5 years. The assets involved in the project can be sold for $50,000 when the project is completed. The required rate of return on the project is 15%. Should the project be accepted based on the NPV rule? Select one: a. No, the project should not be accepted as the NPV is -$37,385. b. No, the project should not be accepted as the NPV is -$12,526. c. Yes, the project should be accepted as the NPV is $0. d. Yes, the project should be accepted as the NPV is $12,333. e. Yes, the project should be accepted as the NPV is $37,474. Next ABC Company has a project that will yield cash inflows of $50,000, $60,000, $70,000, $60,000, and $50,000 in the next 5 years. The project requires an initial cash outlay of $205,000 and a required return of 11%. The company uses the payback period investment criterion. Should ABC invest in this project if its payback cutoff is 4 years? Select one: a. Yes, because the payback period of 2 years and 4 months is shorter than the payback cutoff. b. No, because the payback period of 3 years and 4 months is shorter than the payback cutoff. c. Yes, because the payback period of 3 years and 5 months is shorter than the payback cutoff. d. No, because the payback period of 4 years and 4 months is longer than the payback cutoff. e. Yes, because the payback period of 4 years and 5 months is longer than the payback cutoff. Question 8 Not yet answered Marked out of 1.00 Flag question 0 qaid=2988494&qu 0 Question text 1 DEF Ltd. has the opportunity to invest in a project with the cash flow stream below. What is the discounted payback period on this project if the required return is 15%? Year Cash Flow 0 -$1,000,000 1 $450,000 2 $550,000 3 $350,000 4 $350,000 Select one: a. 2 years and 8 months b. 2 years and 10 months c. 3 years and 8 months d. 3 years and 10 months e. 4 years and 8 months Question 9 Not yet answered Marked out of 1.00 Flag question 0 qaid=2988495&qu 0 Question text 1 GHI Inc. has a project with the following payoff structure and a required return of 16%. What is the IRR of this project and should the firm accept or reject it? Year Cash Flow 0 -$1,250,000 1 $450,000 2 $550,000 3 $350,000 4 $350,000 Select one: a. 14%; accept b. 14.5%; reject c. 15%; accept d. 15.5%; reject e. 16%; accept A project has an initial cash outlay of $100,000 and cash inflows of $20,000 for the next 10 years. If the required return is 10%, what is the profitability index of this project and should it be accepted or rejected? Select one: a. 2; accept b. 1.35; reject c. 1.58; accept d. 1.74; reject e. 1.23; accept